Bihar needs to look at own entrepreneurs

Last Updated: Fri, Jan 01, 2010 19:10 hrs

Bihar is rich in human resources. It turns out unskilled and semi-skilled workers with the same rapidity as IIT engineers and civil servants. Long is the list of top engineers, doctors, civil servants and technocrats from the state. Business schools, medical and engineering colleges always have a more than proportionate participation from Bihar.

Yet, the state is not even a blip on the radar screen of the corporate sector. Human resource-intensive sectors like information technology and information technology-enabled services have shunned the state. In fact, Bihar does not feature in the game plan of most corporations. Apart from Hindustan Unilever, no other blue-chip company has of late put money in the state. Trucks come laden with stuff from neighbours like West Bengal, Uttar Pradesh and even Madhya Pradesh but go back empty. Essential commodities are all imported from other states and, therefore, sell at a premium. Cement, for instance, in Bihar is at least 5 per cent costlier than in the neighbouring West Bengal.

In the past, industry’s bugbear was the poor law and order situation in the state. There was nobody to guarantee the safety of executives posted there. The Nitish Kumar administration has made Bihar a better place. "If you go to any park at Patna in the morning, you will find big cars of every description," according to Chief Minister Nitish Kumar. The point is important. Earlier, such was the terror of kidnappers and extortionists that people had clamped down on any expenditure that could give away their wealth. Not any longer.

When Kumar took over the affairs of the state four years ago, there was hope that the state’s defunct sugar industry would revive. Bihar contributed a fourth of the sugar produced in the country before Independence. It now accounts for less than 3 per cent.

Unfortunately, companies that were brought in by Kumar to invest in the sector have developed cold feet. One has even forfeited the earnest money of Rs 5 crore. There just isn’t enough sugarcane to feed the mills, investors say. Set up the mills and the sugarcane will follow you, Kumar counters. It’s a chicken-and-egg situation. Of course, state-owned Hindustan Petroleum Corp is putting up an ethanol unit in Bihar but experts doubt its commercial viability, given the current high price of sugarcane. And with one year to go for elections to the state Assembly, nobody will be in a hurry to put his money in Bihar.

Such is the nature of politics in the state. Not everybody is sure that there is widespread political buy-in on economic reforms. Caste-based politics still holds strong in the state. What if Kumar does not come back to power? Will his successor have the same enthusiasm for maintenance of law and order or development of infrastructure? These are questions that bother corporations.

Kumar puts the blame at the doorsteps of the Centre. Bihar, he says, has not been compensated for the loss of natural resources and industry to Jharkhand, coal linkages for proposed thermal power stations in the state have not been cleared, and there is no clarity on ethanol. The solution, he says, is to grant the status of "special category state" to Bihar.

The bottom line for Bihar is that it will have to depend on its own entrepreneurs for investments — once locals build a strong foundation, outsiders are bound to follow. Industry estimates suggest that local entrepreneurs have invested close to Rs 1,500 crore in the recent past. Though not large by any yardstick, it does show that there is latent entrepreneurship in the state. But they don’t know what to do.

When Kumar came to power, he brought several top industry leaders to the state. Road shows were held across the country. The idea was noble. One or two big names could have got others also to invest in the state. But that didn’t happen. Instead, it scared local businessmen. Will we be able to stand competition from large players, most of them thought. Most local businessmen complain that the bureaucracy takes a lot of time to put into action announcements made by Kumar and his colleagues in the ministry. Orders have taken up to two years to get notified.

The biggest problem they face is finance. The state is hugely under-banked. And since banks, state-owned as well as private, now follow what the market dictates, there is little the state can do. Businessmen are at times asked to fork out twice or even thrice the loan amount as collateral security. This perhaps is the reason why microfinance outfits like SKS Microfinance have done so well in Bihar. Their customers are large in numbers and non-performing assets are low. Clearly, banks can take a lesson or two from them.

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